Unemployment Taxes

An Ohio court ruled that a former teacher at a church-affiliated school was not eligible for unemployment benefits.

Church Law and Tax 2000-01-01

Unemployment Taxes

Key point. Employees of churches and church-affiliated schools are ineligible for unemployment benefits in most states.

An Ohio court ruled that a former teacher at a church-affiliated school was not eligible for unemployment benefits. A woman was employed as a teacher at a church-affiliated school. At the end of her tenure with the school, she applied for unemployment compensation, and her request was denied on the basis of a state law denying benefits to persons “[i]n the employ of a church or convention or association of churches, or in an organization which is operated primarily for religious purposes and which is operated, supervised, controlled, or principally supported by a church or convention or association of churches.” The court noted that school employees are ineligible for unemployment benefits if (1) the school is an organization “operated primarily for religious purposes,” and (2) the school is “supervised, controlled, or principally supported by a church.”

Operated primarily for religious purposes

In ruling that the school met the first requirement, the court observed:

“Primarily” is an adverb and, as the word implies, it modifies the verb “operated.” It has no purpose or implication in this sentence as to the relative proportion of subject matter of a religious nature that must be provided …. The exemption statute simply requires that the purpose of the organization and its operation or support be primarily religiously oriented in the conduct of its activity. This exemption statute does not require or suggest the weighing of hours of secular and religious instruction or other activity …. Whether [secular or religious instruction] constitutes a majority of hours of instruction is irrelevant. The exemption is determined by the purpose of the existence and operation of the school. If that purpose be primarily of a religious nature, the exemption applies without regard to the proportion of time devoted to religious instruction. As indicated, “primarily” modifies the purpose of the operation, not the relative amount of religious activity or instruction.

The court conceded that “a credible argument may be made that the primary purpose of the school is to educate children in all subjects, including religion.” However, it noted that the school’s principal testified that the school was established in order to teach Catholic doctrine. It concluded: “[The] reason for creating and operating a school affiliated with a religious denomination is to offer a learning experience dominated by a religious environment; a situation distinctly different than that offered in public schools. Consequently … the primary purpose of operating a school of this type is religious in nature, regardless of whether the school or the local church [is a teacher’s] employer.”

Supervised, controlled, or principally supported by a church

In order for the employees of a church-affiliated school to be ineligible for unemployment benefits, the school must be “supervised, controlled, or principally supported by a church.” The court concluded that this test was met. It referred to the school principal’s testimony that “[t]he pastor of the parish runs the school.” In addition, “the only individuals authorized to sign paychecks for the school were the principal and the church’s pastor,” and “the pastor of the church exercised substantial control over the operations and spending of the school, as his consent was required to hire new teachers and to purchase supplies.”

Application. Nearly every state unemployment compensation law contains an exemption identical to the one addressed by the Ohio court in this case. As a result, this ruling will be relevant to any church that operates a school or preschool. Miller v. Saints Peter and Paul School, 711 N.E.2d 311 (Ohio 1998).

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